United Airlines: How Do We Get There
from Here?
How do we get there from here? That’s the question three successive United Airlines
CEOs, thousands of employees, tens of thousands of customers, and a sim- ilarly large
number of investors have been asking themselves for several years. All travelers have
stories to tell, and those told by some of United’s passengers sound like clips from a
horror movie. Some passengers were held over for 20 hours in a military barracks in
Canada, at one point all flights across the globe were canceled due to a computer glitch,
and champion golfer Rory McIlroy’s clubs were lost on the way to a tournament.
These stories are reflections of deeper, more perva- sive problems at the airline. United
has been at or near the bottom in industry performance since its merger with Continental
in 2010. This is true despite its com- petitors also executing large mergers (American
with U.S. Air, Delta with Northwest) and confronting the same economic pressures.
Besides suffering generally declining revenues and profits over many years, United was
the target of 43 percent of all traveler com- plaints filed against US-based airlines in 2015
and ranked last in customer satisfaction among its peers. The company also paid $2.8
million in fines for leaving passengers stranded on the tarmac and mistreating those with
handicaps. One passenger with cerebral palsy had to crawl off the plane because a
wheelchair was unavailable.65
CUTTING TO GET AHEAD
Management’s intense focus on cutting costs—through layoffs, furloughs, and the
outsourcing of baggage handling—has demoralized employees, the same em- ployees
who have to deal with unhappy travelers whose flights have been delayed or canceled, or
who have horrible coffee or lost luggage. Employees also complained that their new
uniforms are cheap and of poor quality.
The airline has long struggled to sign contracts with flight attendants, mechanics, pilots,
and gate agents. An airline analyst for Bloomberg Intelligence described the situation this
way: “Unhappy mechanics do not tend to go the extra mile—or the extra foot—to get the
airplane ready to go.” The seriousness and pervasive- ness of employee problems are
captured by the fol- lowing passenger quote about United’s employees: “As individuals
they are really nice people . . . but they
are in such a horrible situation, constantly trying to deal with customers that are not
happy, and they’re completely powerless.”66
WHO’S TO BLAME?
Who is responsible for sustained poor performance? Many point to the CEO. United has
had three since 2010. Jeff Smisek, who led Continental, orchestrated the merger with
United at that time and was responsi- ble for implementing (or not) many of the changes
since. The merger of the two airlines’ many operating systems was done all at once and
not effectively. For instance, the program used to schedule pilots actually lost track of
pilots and led to widespread flight cancel- lations. The same faulty system even assigned
flights to pilots who were retired or dead.67
Smisek was ousted from the top spot, along with two other executives, due to allegations
of unethical conduct. The three were accused of trading favors with David Samson, chair
of the Port Authority and in charge of Newark Liberty International Airport (a major hub
for United). Samson was to allocate millions of dol- lars to upgrade gates and terminals
used by United in exchange for the airline reinstating a flight from Newark to Columbia,
South Carolina, where Samson had a summer home. The unprofitable flight, later known
as the “chairman flight,” was not only reinstated, but it also was scheduled to take off and
land at times con- venient for weekend travel. (The flight was immedi- ately canceled
after Smisek’s dismissal.)
Oscar Munoz was then appointed CEO, but he suf- fered a heart attack weeks later. In his
absence, Brett Hart, United’s general counsel, served as the interim CEO. Munoz
eventually returned, but the dismissals and the generally difficult situation have caused
many other executives to leave, including some who were poached by competitors. The
result is a “management suite rife with openings, and three key executives have ‘acting’
before their titles.”68 All told, it may be difficult for United to attract top talent in the near
future.
It may be no surprise that in the midst of manage- ment turmoil the airline lost sight of its
customers. Most notably United failed to make a priority of ensuring that flights departed
and arrived on time. The airline has historically relied on linear routing, which entails
send- ing one plane from New York to Chicago, then to Denver, and ultimately to Seattle.
While this practice
maximizes profits by keeping the plane in the air all day, loaded with revenue-generating
travelers, it also means that if something goes wrong at one airport, such as bad weather
or equipment failure, many other flights and their passengers are affected. In contrast,
Delta Air Lines, the industry leader, made on-time per- formance a priority and has
effectively eliminated flight cancellations unrelated to storms.
Some attempts at United to improve the efficiency and speed of boarding also went astray
and actually resulted in passengers spending more time in line and boarding. Finally,
United is widely known to have one of the oldest fleets in the sky.69 This fact has implications for everybody—pilots, flight attendants, mechan- ics, baggage handlers, and, of
course, customers.
POSSIBLE SIGNS OF RECOVERY
There is some light on the horizon. In early 2016, Munoz returned to work as CEO,
bringing knowledge and credibility to the job. He worked outside the airline industry
before becoming United’s chief operating officer, plus he had been on the board of
Continental Airlines. In his short time at the helm, he has visited employees on the job,
crashed employee parties at bars, and reached out to employees in other ways. Coffee
suppliers have been changed, and the airline began providing free snacks in economy
class. Prog- ress has been reported in some contract negotiations. Profits are up, as they
are at all airlines since oil prices have dropped, reducing the cost of fuel. One person
described the current situation this way: “The airline was just incredibly sick and Oscar
Munoz is like a shot of penicillin. It’s going to get better, but it has to have some time to
actually settle in and work.”70
APPLY THE 3-STEP PROBLEM- SOLVING APPROACH TO
OB
Step 1: Define the problem.
A. Look first to the Outcome box of the Organizing Framework to help identify the
important problem(s) in this case. Remember that a problem is a gap between a desired
and current state. State your problem as a gap, and be sure to consider problems at all
three levels. If there is more than one desired outcome that is not being accomplished,
decide which one is most important and focus on it for steps 2 and 3.
B. Cases have protagonists (key players), and problems are generally viewed from a
particular protagonist’s perspective. Therefore, you need to determine from whose
perspective— employee, manager, team, or the organization— you’re defining the
problem.
C. Use details in the case to determine the key problem. Don’t assume, infer, or create
problems that are not included in the case.
D. To refine your choice, ask yourself, Why is this a problem? Explaining why a
particular outcome is a problem helps refine and focus your thinking. It is useful if you
focus on topics in the current chapter, as we generally select cases that illustrate concepts
in the current chapter.
Step 2: Identify causes of the problem by using material from this chapter, which has
been summarized in the Organizing Framework for Chapter 1. Causes will tend to show
up in either the Inputs box or the Processes box.
A.
Start by looking at the Organizing Framework and determine which person
factors, if any, are most likely causes to the defined problem. For each cause,
explain why this is a cause of the problem. Asking the “why” question multiple
times is more likely to lead you to root causes of the problem. For example, are
characteristics related to the CEO(s), employees, or customers causes of the
problem you defined in Step 1? This might lead to the conclusion that Smisek’s
unethical behavior is a root cause of the problem.
B.
Follow the same process for the situation factors. In the context of this case,
situation factors can be external to the organization, such as competitors and the
economic environment. They also can be internal to the company but outside the
employee, such as leadership and organizational culture. For each factor, ask
yourself, Why is this a cause? For example, United’s competitors improved their
processes and customer service, which likely led passengers to choose to fly their
airlines instead. Why did this happen? United’s leadership made cost-cutting a
priority above all else, including customer and employee satisfaction. This eroded
employee morale and further diminished customer satisfaction. By following the
process of asking why multiple times you are likely to arrive at a more complete
and accurate list of causes. Again, look to the Organizing Framework for this
chapter for guidance.
C.
Now consider the Processes box in the Organizing Framework. Are any processes
at the individual, group/team, or organizational level potential causes of your
defined problem? It certainly seems that poor leadership and/or ineffective change
management are potential causes. For any process you consider, ask yourself, Why
is this a cause? Again, do this for several iterations to arrive at the root causes.
D. To check the accuracy or appropriateness of the causes, be sure to map them onto the
defined problem.
Step 3: Make recommendations for solving the problem. Consider whether you want to
resolve it, solve it, or dissolve it (see Section 1.5). Which recommendation is desirable
and feasible?
A. Given the causes identified in Step 2, what are your best recommendations? Use the
material in the current chapter that best suits the cause.
Remember to consider the OB in Action boxes, as these contain insights into what others
have done. Details of this case, for instance, describe how the board replaced the first
CEO due to the alleged ethics violations. This might be part of the solution, but is this
sufficient?
D.
Be sure to consider the Organizing Framework— both person and situation
factors, as well as processes at different levels.
E.
Create an action plan for implementing your recommendations.
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